Conclusion and Recommendations

Conclusion and Recommendations

DOI: 10.4018/978-1-4666-6018-2.ch009
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Abstract

This book started with a brief review of different outlooks on the role of financial sector development in the process of economic growth. Then it highlighted the fact that recent studies, particularly those originating from modern growth theory, suggest that financial intermediation affects growth through various channels. To test this proposition, an empirical model was built, data were obtained, empirical tests were carried out, and results were discussed. The final chapter in this book, therefore, summarises key research findings and discusses the potential channels through which financial sector development affects the economic growth process. The chapter further highlights contributions of this research to growth studies, discusses policy implications arising from the findings of this research, and provides directions for future research and analysis.
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9.2 Summary Of The Research

This study started with a brief review of different outlooks on the role of financial sector development in the process of economic growth. Chapter 1 highlighted the fact that recent studies, particularly those originating from modern growth theory, have suggested that financial intermediation affects growth through various channels. However, a great deal of research fails to effectively examine this relationship within a general macroeconomic framework. On the other hand, while studies originated from Keynesian and Post Keynesian schools of thought, highlighted the role of financial sector, their macroeconomic models concentrate on the real sector analysis only. Chapter 1 explains that in the absence of such attempts, this book aims to explore the dynamic effects of financial markets on key macroeconomic variables. To that end, Chapter 1 provides a brief definition of financial sector development, and concludes that the financial sector can be called developed if the efficiency, stability, and competitiveness of the sector improve:

  • 1.

    The range of financial services.

  • 2.

    The volume of transaction diversity of financial institution increases.

  • 3.

    Sophistication of activities.

  • 4.

    Structural changes of the market.

The research question arose that is whether financial development affects real economic activities and does the structure of the financial system matter for economic growth outcome. Accordingly the main research objective was to investigate the impact of financial sector development on real sector key indicators such as investment, savings and productivity growth. The significance of this study was addressed in terms of integrating the financial sector with the real sector in a comprehensive macroeconomic model in Post-Keynesian fashion, and in terms of the econometric techniques which enable the research to address simultaneity issues among variables.

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